SMS marketing guide: Boost conversions & recover churn

What is SMS marketing?

SMS marketing is the act of sending text messages to customers for marketing purposes. When done correctly, it can be a very effective tool. SMS was invented so friends and acquaintances could send quick, easy-to-digest messages to one another. These shorter messages are more convenient than an email or other forms of communication such as voice-over multi-line VOIP because their small size and phone integration mean they can be opened and read quickly.

SMS marketing is more effective than email marketing

The use of SMS marketing is exploding for one simple reason, it can be more effective than email marketing. How much more effective depends on the metric you're discussing, so let's take a look at some important statistics about SMS and its use as a marketing tool.

SMS open rates are 98%

We mentioned how easy to read and digest SMS messaging was in the intro. The reality of this is illustrated perfectly by the open rates of SMS compared to email. While a whopping 98% of SMS messages are opened, only 20% of emails are. 

SMS engagement rates are nearly 15%

There are many ways of measuring engagement. Perhaps the most useful is the click-through ratio. Nearly 15% of SMS messages prompt a click. By contrast, a rate of 2.5% or so is considered good for an email campaign. 

SMS conversion rates are over 2%

In 2020, the average conversion rate of an SMS campaign was 2.13%. That puts the conversion rate for SMS nearly as high as the click-through rate for email.

What they don't tell you: SMS marketing solves a specific need

There was a time when emails marketers blasted out emails indiscriminately, and certainly unsolicited. This led to the rise of spam filters and an industry-wide reckoning on how email marketing was carried out. There are similar strategies that govern the most effective way to use SMS marketing. Text messages are most effective for short, reminder-style communications.

Appointment reminders

This may be the first use of SMS by businesses. A quick reminder about an upcoming meeting or appointment is sure to be read and takes almost no time out of the day of the recipient. 

Feedback requests

Whether you're rolling out a new feature, or just soliciting general feedback from valued customers, the high open and click-through rates of SMS make it a valuable way to do so.

Special promotions 

As an opt-in medium, there are certainly use cases that customers hope to get out of the SMS messages that you send them. One survey showed that 70% of consumers would like to receive mobile coupons via SMS. So, letting your customers know about special promotions is the exact type of communication they're hoping for.

Feature announcements

Conveying your value proposition to customers is an important part of reducing churn. One of the best ways to do that is to let your customers know about new features that add value to your product. The high open rate of SMS messaging will get your value proposition in front of as many eyeballs as possible.

Cart abandonment

Everyone in digital sales knows the pain of abandoned carts. A lot of money is left on the table every year by companies who fail to follow up on abandoned carts. SMS is a great way to remind customers that they wanted to purchase your product. 

Payment failure notifications

Failed payments are a frustrating and common cause of churn. Thankfully, these are usually customers that haven't made a conscious decision to churn, so they can be recovered by reaching out. ProfitWell rolled out an SMS Churn Recovery solution that will automatically send an SMS message to customers if their payment fails, allowing them to correct the issue and avoid a churn.

Why SMS marketing is an underrated retention strategy

Up to 40% of churn that SaaS companies incur is involuntary. Customers who forget to update cards after they've expired, or whose payment fails for one reason or another are easy enough to save, but you must be proactive about it. The quick, reminder-style messaging of SMS makes it an ideal platform to carry out your retention strategy.

Personalized direct communication

One of the lessons that carries over from email marketing is that people hate being treated like a number. Personalization gets better responses. Text messages are generally viewed as a more personal way of communicating, so they are ideal for this.

Send alerts to avoid payment failures

You can send a message to remind a customer that the card they have on file is about to expire. You can send another one after the payment has failed to remind them to take action to save their account.

Send subscription renewal reminders

Even if the card isn't going to expire, you can help ensure that the money to cover the funds is in the account by reminding customers when their account will be charged several days before it happens.

Automated process saves time and manpower

With tools like ProfitWell Retain, much of this process can be automated, so you'll be working to retain customers without taking time out of your busy day.

How to build an effective SMS marketing campaign

Using SMS as a retention marketing strategy requires a multi-pronged approach. There's more than one way to save a customer from churning, and you'll want to employ the options that work best for a given situation. To do that, you need to know what your options are. Below are some common ways SMS messaging is used to reduce churn.

Track customer cohorts to engage users proactively

Customers who behave similarly work well as proxies for one another. If customers who churn share a lot of characteristics, then those cohorts who have not churned yet may very well be at risk of doing so. Reaching out to them can help prevent that from happening. ProfitWell Metrics can help you determine your customer cohorts.

Identify engagement drop-off points to build your SMS strategy

By using a tool like ProfitWell Metrics, you can detect when customers have dropped to a level of engagement that may indicate they will churn soon. An SMS message can help re-engage them with your product.

Connect with customers with localized messaging

The time you send messages, and even the language you use, depends on where in the world the customer is located. By localizing your messaging, you stand a better chance of it being read and responded to. ProfitWell retain also handles this for you.

Send dunning messages before a payment fails

Dunning messages are to let customers know about the status of their account. If a card is expired, or a payment has failed, dunning messages let the customer know, so they can fix the problem. ProfitWell Retain sends these messages on your behalf automatically.

The 4 golden rules of SMS marketing

Just as there are a few types of messages that work really well for SMS, there are a few rules that need to be followed about how you manage your SMS strategy. In order to be a good, ethical SMS marketer, and stay on the right side of the law, be sure to follow these best practices.

Make sure subscribers opt-in 

Not only will unsolicited texts annoy your customers more than it will benefit you, but sending unsolicited texts could also run afoul of laws such as CAN-SPAM.

Keep the message simple

The benefit of text messaging is that the messages are quick and easy to read. The longer and more complex your message, the more you reduce this benefit.

Time it right

While there's no universally correct time to send a text message, it's likely that there will be a best time for your particular customer base. Think of when your customers will most likely be responsive to text messages. Analytics, such as those provided by ProfitWell Metrics can also help you narrow down the best times to text customers

Never spam text

Nobody likes spam. You'll annoy your customers, cause them to opt out of your service, and possibly violate local laws. It's imperative, then, that you are always thoughtful about the messages you send.

SMS Marketing FAQs

Is SMS marketing effective? 

Yes. When used for the type of message than can be quickly read and acted upon, SMS is more effective than email due to the higher open and click-through rates.

How much does SMS marketing cost?

Unlike email, sending SMS messages isn't free. You'll need to cover the cost of SMS, which is between $0.01 and $0.05 per message, depending on the provider. If you need to lease a short code to send your messages from, the prices start at around $500 per month.

Is SMS marketing legal?

Yes, although you must only send messages to customers who have opted in to receive them, and you must allow customers to easily opt out of receiving them.

What is the best SMS marketing tool for churn recovery?

ProfitWell Retain makes SMS just one part of a powerful automated solution for stopping churn due to failed payments.